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Rumble In Toontown

February 19, 1995

News: Analysis & Commentary: Deals

RUMBLE IN TOONTOWN

A showdown is shaping up in Hollywood that would do Gary Cooper proud. On Feb. 7, Silicon Graphics Inc., whose graphics computers helped create the special effects in Jurassic Park, Forrest Gump, and other movies, said it will shell out $500 million in stock for two computer-animation software companies, Wavefront Technologies Inc. and Alias Research Inc. And Hollywood sources say SGI already is trying to talk filmmakers into adopting the new technology it is assembling. Among the companies that have been approached, says SGI CEO Edward R. McCracken, is DreamWorks SKG, the new studio that teams Jeffrey Katzenberg, Steven Spielberg, and David Geffen. Neither side will confirm that a deal is imminent.

Why SGI's big move on Tinseltown? In a word, Microsoft Corp. Last year, the software giant bought Softimage Inc., a rival to Alias and Wavefront. The prize both companies covet: control of the tools to build interactive TV, video games, and online information systems. Entertainment, McCracken says, is already "the fastest-growing computer market by far."

SGI, with its powerful computer servers and 3-D graphics workstations, hopes to lead a shift to all-digital movie studios. Alias and Wavefront, which create animation and make special-effects software, dominate their fields and could give McCracken the clout to standardize data formats that are a key stumbling block to movie digitization.

Microsoft, however, has similar designs. Already, it has announced Softimage deals with Sega Enterprises Ltd., Fox Animation Studios Inc., and others. And last month, it put pressure on SGI's new partners by dropping prices on Softimage programs as much as 65%. But with SGI's backing, the two companies should be far more formidable foes. Could be a digital High Noon in the making.By Robert D. Hof in San Francisco